Forward-looking firms are constantly finding new ways to advance their technological capabilities to remain in line with evolving compliance requirements. This level of agility is not without risk, however. Modernising and overhauling core reporting systems is a significant project that must be managed within a robust operational resilience framework. Unstructured change can risk non-compliance, data corruption or removal, as well as a reduction in operating efficiency.
What are the Main Risks of Legacy Systems?
Legacy systems can present many risks, mostly through their reliance on manual review and slower processes that can easily lead to potential errors. These older, manual systems are costly to maintain and make it more difficult to get up-to-date information. Modern systems are more streamlined and integrated, which means information outputs are less likely to be fragmented. This also eliminates the need for separate systems for separate regimes and reporting requirements, as all reporting can be processed and submitted within an integrated dynamic reporting system.
How can Firms Prepare for Overhauling Core Reporting Systems?
Firms should be fully prepared for any potential issues with the overhaul process and put plans in place to remove or mitigate risk. To ensure a successful implementation of modern systems and a core systems overhaul, firms should focus on the following:
- Conduct a full audit of existing systems, processes and data flows
- Map these systems to current regulatory obligations under key reporting regimes such as the European Market Infrastructure Regulation (EMIR), Markets in Financial Instruments Regulation (MiFIR) and the Securities Financing Transactions Regulation (SFTR)
- Establish clear governance and oversight mechanisms and preserve legacy data throughout the transition
- Define clear objectives for the new systems by considering real-time capabilities as well as future scalability
A Phased Approach to Modernisation
Overhauling legacy systems is a complex task and should not be attempted without a clear plan. Firms should consider a phased implementation process, which will allow them to identify risks as they emerge and fix issues in a controlled way on a structured basis. At every stage of implementation, important data will need to be validated and reconciled, and all appropriate steps should be taken to ensure that data is preserved. One way to achieve this is to continue running legacy systems in parallel to the new systems throughout the rollout to prevent data loss while also monitoring the integrity of data after key stages of change. Firms will be expected to communicate a robust and achievable transition plan to regulators in advance, and provide regular updates through proactive communication at key stages of the process to maintain transparency. Overhauling core reporting systems can be a challenging process, but it is an essential undertaking for firms to be competitive in this evolving regulatory landscape. By undergoing this process, firms will benefit from a more agile and efficient reporting framework, while also building trust with regulators due to their willingness to adapt. When approached correctly, this kind of digital transformation will build resilience, create a strategic advantage and benefit a wide range of stakeholders. Legacy systems slowing you down?
Contact Novatus Global to manage a phased core systems overhaul that preserves data integrity and meets evolving regulatory demands.
